Q & A Table of Contents
Negotiating The Price Of Property
From: Brent, Winnepeg, Canada
Question: I am entering a process of buying property, (building lot). The couple selling this lot wish to start exchanging information toward the eventual face-face negotiating of price. Do you have any key elements I can use to negotiate this price over the next few months.
Response: Your face-to-face negotiations should be preceded by a fair amount of homework on your part aimed at determining the value of the property to you.
Comparison with sale prices of similar properties in the same general area is a first step.
After that you need to take a serious look at the elements that determine the value of the property to you: is it for residential or income-producing use? what is your total project for the budget -- and how much money will construction and other improvements cost? It is worth noting that construction cost estimates are virtually always over-optimistic.
Once you have established the value to you, factoring in your possible use of loans or other financing mechanisms, then you know how far you can go in the price negotiations.
If the sellers don't have an asking price, and if they ask you how much you're prepared to pay, offer a range somewhat on the low side. For example if you are prepared to pay a maximum of $12,000, you might initiate the bargaining by suggesting a range of $8 to 9 thousand. That gives you lots of room to bargain -- and the response of the sellers will tell you how close you are to what they want.
Don't let yourself get caught up in the need to make a deal. It can put you in a situation where you pay more than you should -- 'just to be a nice guy'. Consider what you would do if this property were not available at all -- or at a reasonable price. When you have a better sense of your alternatives in mind, it gives you a better sense of how badly you need to make the deal.
Good luck with this,
Steve
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